Michelin in China: Implementing a Human resources Strategy

This report concerns the human resources management challenges experienced during and after the joint venture between Michelin Company and a Chinese company, Shanghai Rubber and Tire Company Limited. The report outlines the different management approaches used by Michelin China, the impact of cultural dimensions on organizational effectiveness, and a case study of the health sector in New Zealand.

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Michelin in China: Implementing a Human resources Strategy
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Executive Summary
This report concerns the human resources management challenges experienced during and after
the joint venture between Michelin Company and a Chinese company, Shanghai Rubber and Tire
Company Limited. The report starts with an introduction to the content of the case study,
followed by a description of eight management approaches that the company applies in its
management including: Empirical approach; Human behavior approach; social systems
management approach; Decision theory approach; mathematical approach; Socio-Technical;
Systems Approach; Contingency Approach; and Operational Approach.
The report then outlines the Hofsted cultural model effect on organization effectiveness,
specifically the Power Distance Index (PDI) dimension. Further, the report discuss the PDI
application in New Zealand’s Health sector organization effectiveness. The report ends with a
critical look at the meaning of culture.

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Contents
1. a). “Michelin China Way”........................................................................................................................4
Introduction................................................................................................................................................4
b). Michelin China Management Approaches............................................................................................5
i). Empirical Approach.............................................................................................................................5
ii). Human Behaviour Approach.............................................................................................................5
iii). Social Systems Management Approach...........................................................................................5
iv). Decision Theory Approach................................................................................................................6
v). Mathematical Approach....................................................................................................................7
vi). Socio-Technical Systems Approach..................................................................................................7
vii). Contingency Approach.....................................................................................................................8
Viii) Operational Approach.....................................................................................................................8
2. Hofstede’s Cultural Models and Organization Effectiveness.................................................................8
Power Distance Index (PDI)........................................................................................................................9
3. Hofstede Cultural Model Application in organization Effectiveness in New Zealand’s Health Sector 10
4. Critical Assessment of the meaning of Culture....................................................................................11
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13

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Michelin in China: Implementing a Human resources Strategy
1. a). “Michelin China Way”
Introduction
The case is about how to effectively manage human resources in an international setting.
Michelin, one of the world’s biggest producers of car tires with the main headquarters in France,
decided to get into the rapidly growing Chinese market through a joint venture with a Chinese
company, Shanghai Rubber and Tire Company Limited. The main challenges the company
faced was on how to integrate employees with different cultural and historical background into a
team that works flawlessly to produce desired results.
The company retained some expatriate managers from the parent company, hired some
managers from international firms working in China and the rest of the employees was made of
Local Chinese. The cultural differences between the expatriates and the locals were one
challenge the company had to overcome before it could become fully functional.
The cultural differences were minimized by the mediation of the Chinese managers hired
from international organizations operating in China who had experience working with people
with different cultural backgrounds. Also, the company invested heavily in the training of the
employees which included study abroad for managers.
Michelin China way is the incorporation of the best of both worlds: Chinese and Western.
The chines have respect for authority and follow communication strictly from their seniors while
the western culture allows all the employees to get involved in decision-making processes.

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b). Michelin China Management Approaches
i). Empirical Approach
Empirical management approach involves the application of evidence-based practices in
the management field. In Empirical approach, the management depends more on practices that
have proven to bring positive results rather than depending solely on predictive models.
Experience forms the main basis of knowledge in empirical management, and insights or
information gained through practice is considered infinitely more valuable than theoretical and
predictive models. Michelin shanghai utilizes the empirical management approach in various
ways including promotions and strategic management. In promotions, job experience is one of
the basic qualifications. In most cases, promotions are through seniority, but there is room for a
person with a proven record of excellent results climbing up the corporate ladder (Burrow,
Kleindl, & Becraft, 2017).
ii). Human Behaviour Approach
Human Behavior approach to management makes extensive use of the behavioral school
of thought which posits that human behavior is an acquired trait and as such, it can be taught. In
other words, given the right training and conditions, an employee can change and perform better
at his or her workstation. In Michelin China, the management invests a lot in training its
employees, both on the job training and school-based program to ensure that the employees have
the requisite know-how to perform at their peak in the company. Also, the management makes
sure it motivates the workers through competitive pay and other favorable working conditions.
iii). Social Systems Management Approach
A system can be thought of as a group of distinct parts which work together to make up
the whole. An organization or company is made of many interrelated parts including employees,
machines, buildings and the finances. Most theorists consider organizations as open systems as

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during their various processes they interact with the environment. Closed systems are usually
self-sufficient and do not need the rest of the environment to be functional.
The environment is important in social systems theory of management as an organization
system depends on it for survival. Most of the raw materials for production comes from the
environment, and the human resources are sourced from the environment. Once the company
makes the final product, the environment provides a source for the consumers of the said product
or products. In the process of making the product, there are waste products which eventually find
their way into the environment. The government makes a significant part of the environment as it
ensures business environment through regulations
Michelin China applies the systems approach to management by ensuring that all the
stakeholders in the environment are satisfied. To the company, measurement of its profitability
and sustainability is not only done on the financial side. Rather, the company measures its
effectiveness on its ability to meet the demands of stakeholders who are concerned with the
organization’s activities. Also, Michelin China measures its effectiveness as a company by how
well it can effectively adapt to the ever-changing environment.
iv). Decision Theory Approach
Actions derive from decisions, implying that life is made up of decisions. Decision-
making skills are some of the essential traits a human being can have as poor decisions lead to a
bad life and vice versa. Applied to business management, most of the decisions are made by the
management which is later communicated to the other levels of the organization. However, in
some organizations, employees are given a chance to give their input in the process of decision-
making.
Michelin China considers the company as a decision unit and the manager as a decision-
maker. All units in the company need to have plans and make decisions on issues under their

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charge, and in combination, they make up a decision unit. However, the manager in each
department is the overall decision maker, and ultimately, the CEO has the final authority in
deciding for the whole organization.
v). Mathematical Approach
Mathematics is a tool and language for providing precise measures involved in different
business processes. In management, businesses use mathematics to create models that support
the managers in decision making, providing a clear and precise view of the various variables
involved and the resultant product. Michelin China management makes extensive use of
mathematical models to aid it in making complex decisions, for instance regarding the optimum
number of employees and the number of inputs that would be needed in making the product. The
drawbacks to the application of the mathematical approach to management are that not every
variable needed for decision making can be measured precisely, making it a supportive rather
than a fully-fledged management approach.
vi). Socio-Technical Systems Approach
Complex organizations are composed of various aspects such as human resources with
technical know-how, the throughputs, and the assets. Any mismatch between the technical
(knowledge and procedures) or social aspect in organizations will fail in the whole process,
jeopardizing the attainment of organization goals and objectives. Therefore, Socio-technical
management approach deals with finding ways of optimizing both the social and technical
aspects of an organization. Michelin China has adopted the Socio-technical approach to
management and strives to achieve a joint optimization resulting in optimal technical
performance and at the same time ensuring an improvement in the employee’s work life, which
ultimately lead to improved performance of the whole company.

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vii). Contingency Approach
Michelin China’s management realizes that organizations are different and are affected
by different sets of environmental factors meaning that they cannot be managed in the same way
and provide similar results. Contingency theory emphasizes the impact of the situation in any
managerial decision as ultimately, it will be responsible for the results. According to the theory,
the success of a manager depends on the circumstance, the task motivation, and the relation
motivation. The Managers at Michelin China use the least preferred coworker (LPC) tool to
measure task or relation motivations. To improve on the management processes, Michelin China
utilizes various methods to affect and control the situation’s favorability.
Viii) Operational Approach
Michelin China, like any other business, is in the market to provide the customers with
the highest possible quality of service with minimal resources possible so that the company can
use the resulting difference to invest in the business and compensate the workers and
shareholders of the company. The processes of ensuring optimal use of a business’ resources to
give the end users the highest quality of the product is referred to as operations management
approach.
2. Hofstede’s Cultural Models and Organization
Effectiveness
Multinational companies face many challenges when doing business in different countries.
Culture is one of the main challenges that MNC face especially in the management of its human
resources. Geert Hofstede developed a model that analyzed different national cultures in
different countries showing the various aspects of culture that impinge on an organizations’
effectiveness. Hofstede (1984) theorized that national cultures are a general representation of the
culture of the people in the specific country and that the cultural perceptions and behaviors at the

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organization level will mirror the one's national level. Hofstede recognized various cultural
dimensions that have a bearing on the organization’s effectiveness which are:
 Power Distance Index (PDI)
 Individual vs. Collectivism (IDC)
 Uncertainty Avoidance (UAI)
 Masculinity vs. Femininity (MFA)
 Long-term Orientation vs. Short-term Orientation (LTO)
 Indulgence vs. Restraint (IRI)
Power Distance Index (PDI)
PDI has the greatest impact on an organization’s effectiveness as it affects the
relationships between the workers and management, posing a real threat to communication
effectiveness. A breakdown in communication can mean the end of a business.
According to Hofstede, Power distance refers to the extent to which members of a nation
or society accept the unequal distribution of power as a normal state of affairs, and even expect
it. In cultures with high PDI values, they seldom question authority and are comfortable working
in hierarchical organization structures. Cultures with high PDI values are mainly found in
countries in Africa, Asia, and Latin America, while the ones with low values are found in
countries in Europe and North America.
In cultures with high PDI values, businesses tend to be hierarchical, and the employee's
such organizations are reluctant to make decisions, and they only make decisions they have
experienced their superiors making. In other words, the subordinates are unwilling to make to
take up greater decision-making responsibilities or leadership roles. They depend on their
superiors to make all the decisions and see their roles as implementers. Even when they can see

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mistakes in their superiors’ decisions, they do not question or give suggestions to improve on the
decisions. In such kind of an organization, the effectiveness of the organization is sorely
hampered as the people on the ground have no input on the decisions that affect their operations
which might eventually lead to low productivity and by extension, overall organizational
effectiveness.
Michelin China was confronted by a cultural conflict with its parent company operating
in a low PDI culture in France while the joint venture operated in China with high PDI (80)
values. Most of the employees were locals and believed that management knew everything and
their input was not needed in decision-making processes. The employees had a problem
reporting problems to their superior who could work to resolve them making the management
think that everything was going according to plan. Also, they had a problem with the expatriate
managers giving them instant feedback. At the same time, employees at Michelin China did not
respect the decisions made by the personnel department as it did not have a formal position in the
company’s hierarchy which made it difficult for the department to implement the career
management system. All these issues made the organization very ineffective with a lot of
rejected products and increased costs of production.
3. Hofstede Cultural Model Application in
organization Effectiveness in New Zealand’s Health
Sector
It is important to realize that the national cultures as conceptualized by Hofstede applies
to all the other aspects of life including politics, business, and family (Cavusgil, Knight,
Riesenberger, Rammal, & Rose, 2015). The Power Distance values for New Zealand are low
(22) indicating that New Zealanders realize that the inequalities in the societies are not absolute
and can be challenged and overcome, a fact that has been instrumental in ensuring a stable

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democratic environment. The health sector in New Zealand has many players including hospitals
(private and public), insurance companies and other service providers involved in maintaining
the health of the nation. As noted above Power Distance is one of the main cultural factors that
determine the effectiveness of an organization and as such organizations in the health sector in
New Zealand are affected by the cultural dimension in one way or the other.
The cultural analysis using Hofstede cultural dimensions can contribute immensely to the
effectiveness of organizations in New Zealand in various ways. First, any multinational
organization setting business in New Zealand ought to be aware of the cultural differences and
similarities between the country and the country of origin. If the multinational company is from a
low PDI country, then there will be fewer cultural conflicts in the organization and the vice versa
is true.
Once the Health sector organizations in New Zealand realize the conflicts resulting from
cultural conflicts, they can focus on dealing with the conflicts through training and changes in
the communication style in order to accommodate everyone the change process will take time
but gradually the company will be able to make an organizational culture which is unique but
effective.
4. Critical Assessment of the meaning of Culture
Culture is a difficult and elusive concept to clearly and comprehensively define as the
term continue being applied to explain different issues and objects (Narayan, 2017). The
concepts referred to as culture range from the comprehensive “that which distinguishing the
humans from animals” to the specific “that which distinguishes members of a gang.” The main
aspects of the concept “culture” are that it is mainly communal and differentiating. It does not
sound nice to have a culture of an individual, meaning, therefore, that culture must be shared or

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common to the group under discussions which should be made of more than one individual.
Also, the characteristics of one cultural group must be significantly different from those of the
other groups to separate the members of any two groups. However, groups with some common
elements can combine to form larger cultural groups, or can be categorized by an outsider into
one cultural group.
Another aspect of culture is that it is not an inherited, but it is acquired or learned. A
child learns or acquires the traits of being human as he or she grows up in among human beings.
Most people are born with the capacity to learn to practice distinguishing aspects of the said
cultural group.
No two organizations are facsimile copy of each other, as they have different personnel
with different ways of doing things. Organizations can, therefore, be said to be a cultural group
which possesses a culture. Organizational culture cannot be duplicated, but people can learn and
thus be included and categorized as members of the said cultural group.
Hofstede’s national cultures, therefore, imply a set of characteristics generally shared by
people in the nation, but not necessarily in uniformity. Big cultural groups have less in common
compared to smaller cultural groups. In other words, it would not be a wonder to find that within
a country or continent with high PDI there many people or groups of people with very low PDI.
Conclusion
Culture constitutes all the shared differentiating characteristics of members of a certain
group; a group made up of two or more people. The shared characteristics cannot be passed on
from one individual to the other through the bloodline, but individuals can acquire or learn the
behaviors of a group and qualify to be categorized as members of the cultural group.

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References
Burrow, J., Kleindl, B. A., & Becraft, M. B. (2017). Business management. Boston, MA : South-
Western Cengage Learning.
Cavusgil, S. T., Knight, G. A., Riesenberger, J. R., Rammal, H. G., & Rose, E. L.
(2015). International business: The new realities.
Hofstede, G. (1984). Culture's consequences: International differences in work-related values.
Beverly Hills: Sage Publications.
Narayan, K. (April 03, 2017). Culture. South Asia: Journal of South Asian Studies, 40, 2, 287-
290.